GST Refund On Cancelled Air Tickets Gets GSTAT Nod, Airlines Can Claim Tax Back If Passengers Receive Full Refund

The Goods and Services Tax Appellate Tribunal (GSTAT) has approved airlines' ability to claim refunds of GST on cancelled flight tickets, provided they have returned the ticket fare and tax to passengers. This decision provides relief to airlines struggling to recover GST on cancelled bookings, especially during the COVID-19 pandemic.

The Ernakulam bench of GSTAT ruled in favor of Singapore Airlines Ltd against the Kochi Commissioner of CGST and Central Excise, in a case involving eight GST refund claims amounting to Rs 45.92 lakh between October 2019 and March 2021. The airline had cancelled several flights and refunded passengers, including GST, but was unable to adjust the credit notes against its output tax liability.

The tribunal rejected the airline's refund claims initially, but overturned the decision and directed the department to process the refunds within two weeks, along with applicable interest. The tribunal noted that the airline had provided sufficient evidence that passengers had received their refunds directly and that the airline had not retained the tax amount, ensuring no unjust enrichment.

Industry experts welcomed the decision, emphasizing that GST should not become an additional cost when transactions are cancelled and customers receive complete refunds. They stressed the importance of thorough documentation, including passenger-level records connecting invoices, credit notes, and actual refund transactions, to establish refund eligibility.